After 35 years, no reliable data on federally supported technology transfer
Here is Sylvia Kraemer, writing in Science and Technology Policy in the United States (2006), on a fundamental problem in federal research policy identified by a Department of Commerce report:
In its most recent report, the department recommends that the federal government “develop the measures needed to monitor the technology transfer process” and institute “a system . . . to collect and disseminate such information.”
This last recommendation begs the question of why such a system was not required by the various statutes that comprise federal technology transfer legislation in the first place. Perhaps the conviction of the policies’ rightness was so strongly and widely held that no one thought any verification was required. Nonetheless, until the federal government systematically collects and reports comprehensive information about the technological content and industry (by firm) allocations of waived patent rights as well as technology transfer activities, we will be left pretty much where we were in 1965, when President Lyndon Johnson’s attorney general Nicholas Katzenbach advised the Senate Small Business Committee that he knew of no “data, studies, or facts of any kind at all which could possibly support” the notion that giving patent rights to contractors would “foster the prompt working of inventions.” (88)
Law provides no means to gather the information necessary to evaluate whether contractor ownership of patents covering federally supported inventions speeds the use of these inventions. Setting aside the question–a real one–of whether there is any such thing as an effective “technology transfer process,” the odd question is why the federal government has not built at least observational accountability into its disbursement of research funding. Even if the government did not intend to enforce compliance with invention management regulations, at least everyone could see the effect of those regulations. Instead, we are stuck with statements of intent, misplaced to represent outcomes.
Kraemer speculates that folks were so sure of themselves they didn’t need to worry about accountability. Kraemer is too generous by a mile. Bayh-Dole is one of the offending bits of regulation. There, the accountability for contractors’ management of subject inventions they have claimed has been diluted from the Institutional Patent Agreement protocols to the point of uselessness. Agencies are not required to request utilization information from contractors, may request information no more than once a year, and any information that agencies receive from contractors is expressly exempted from FOIA disclosure. Even the information identified as requestable regarding status of claimed subject inventions is minimal–
Such reports shall include information regarding the status of development, date of first commerical [sic] sale or use, gross royalties received by the contractor, and such other data and information as the agency may reasonably specify.
That is, efforts toward practical application, date of commercial practical application, and income made by the contractor from the patent rights. Why these things should be kept secret is in itself odd, especially at universities and their non-profit research foundation front organizations. One would think that the drafters of Bayh-Dole intended to limit public accountability. It wasn’t an oversight, not incompetence, and not a belief in the rightness of the cause (though no doubt all of these things were in play, too!)–but rather the drafters as best they could aimed to prevent an accounting of Bayh-Dole. It is a feature not a flaw.
AUTM’s licensing survey shows growth of bureaucracy, not the success of Bayh-Dole
Despite the repeated protestations that “Bayh-Dole is a great success,” there’s no serious evidence for such claims. What about the AUTM licensing survey? you might ask. The AUTM licensing survey has numerous failings (among them, repeat counting of startups licensing from multiple universities, information not audited for accuracy, conflation of sales of goods and materials with commercialization licenses of patents, conflation of subject inventions with other patentable inventions and conflation of patentable inventions with all the other flotsam university policies define as “inventions”). Among these other shortcomings is that the survey discretely fails to ask for the key information that Bayh-Dole indicates that federal agencies might ask for, if they are so inclined. That is, there is nothing in the AUTM survey that indicates whether an invention is being developed at all or whether it is being used commercially or sold.
Even the AUTM reported income from licensing is ambiguous–does it reflect income from speculation on patents or earned royalties from commercial sale or use? Separating out the upfront fees and patenting cost reimbursements and income from equity in startups and buyouts of future royalty streams from earned royalties on sales or use would be a good step toward clarifying the structure of payments. The upfront fees are payments that convey rights in a patent–that is, patent speculation. Earned royalties reflect a market activity, and thus carry a very different sort of information. AUTM carefully avoids collecting information that would indicate that Bayh-Dole is “successful.”
One would think that if Bayh-Dole was indeed so “successful,” AUTM would be the first organization to report data to back the claim. Instead, AUTM reports activity data and asks us to treat it as if it described outcomes. AUTM reports the number of inventions disclosed (expanded because the university policy definitions of invention have expanded to include non-inventions and non-IP, but not strictly the number of subject inventions reported and claimed); the number of patent applications filed and issued (expanded to include all provisional applications, utility applications, continuations and continuations-in-part and divisionals and re-issues, PCT filings and national phase foreign filings, so that one invention can result in a stream of patent applications–and in any case a function of the university’s speculative patent budget (now often in the millions) and not of licensing activity–and in any case, not reporting activity separately for claimed subject inventions); the number of licenses granted (expanded to mean any contract of $1,000 or more, and mixing in “licenses” granted to research sponsors in research agreements as well as “bailments” of biomaterials and “sales” of software and digital media); and the number of startups (expanded to include shell companies set up by the universities, but lacking independent operations).
The numbers AUTM reports reflect the growth of professionals symbiotic (er, parasitic) on the output side of research enterprise. The number of and size of university technology transfer offices does not reflect the effective transfer of new technology (whether a process or not), but rather how many people make their living by “processing” the assets that administrators now claim that universities own. We see in the numbers the institutionalization of research assets. The number of patent applications and issued patents reflects the millions of university dollars diverted to the profit of patent attorneys and other invention management professionals. The number of startups indicates how much speculative money is profiting those involved in the startups–especially universities taking their piece of the action in the form of licensing fees and research contracts. That is, there is plenty of money flowing into the technology transfer “sector,” and people are making good livelihoods there, but there’s nothing to demonstrate that the growth of the sector–whether by numbers of people, patents, or payments–also reflects growth in the transfer of technology subject to such management.
It’s absolutely clear that such metrics as the AUTM licensing survey show the growth of a professional class that depends on the existence of a well funded show of trying to transfer research assets. Without supporting data to know, all we can identify is the show. University administrators have focused most of their efforts on trying to own everything they can, and at building web sites to promote their ideology (and offer a defense for their existence), and at creating million-dollar databases to record the assets they have claimed. As the song goes, they are “programmed to receive.” Actually seeing stuff used by others, presented as a sincere wish, takes a back seat to making sure financial resources are allocated to ensure policy is followed. There is an unlimited budget for suing faculty inventors for non-compliance, for instance, but not so much for releasing inventions to inventors when it’s clear the university has done nothing with its ownership claim.
What Bayh-Dole has actually done if uncontested must be its actual purpose
If we turned, then, to assess what Bayh-Dole has actually done, quite apart from its statements of objectives and the selective and self-praising “success” stories offered by university licensing programs and press offices, then we would see a rather different story. We can’t see–because the data isn’t there or is suppressed as governmental secret–the technology transfer effects. For that, we would need, for each claimed subject invention, each year, the status of development, the date of first commercial sale or use, and the earned income from royalties (distinct from all the other fees charged by universities in the granting of licenses). Instead, we can see–from the self-reporting–that Bayh-Dole has had the effect of creating a huge professional bureaucracy devoted to extracting livelihoods from claiming ownership of federally supported inventions. If that’s “success” by federal standards, then so be it.
Further, we can see that Bayh-Dole has inspired universities to treat faculty as labor, that a law that prevents federal agencies from claiming ownership of inventions made with federal support has been turned into a mandate that universities do or should own everything they can–federally supported inventions, certainly, and all other inventions just in case they might also be federally supported or (in a wonderful twist of administrative logic) to be “fair” to all inventors and produce a “consistent” policy. (“If we take only federally supported inventions and bungle most of those, surely to be fair we have to treat all inventions just this same way”–or so the logic goes).
Finally, in the rise of internal offices of patent licensing at universities, we can see how Bayh-Dole has undermined the national infrastructure of invention management–the very infrastructure that advocates of Bayh-Dole appealed to in the run up to passage of the law. The point of Bayh-Dole was to make federally supported inventions more readily available to this infrastructure, given its apparent success at transferring technology. Instead, that infrastructure was dismantled and in its place arose university licensing offices, each claiming provincial rights, thus fragmenting research platforms into local spheres of ownership and exclusive deals, just as the federal government sought to spread research across universities and to create more collaborative projects spanning multiple organizations. The effect of Bayh-Dole has been to suppress the ready development of platforms involving inventions made at multiple universities (and other nonprofits).
If we stated the objectives of Bayh-Dole in terms of what has actually happened, rather than in pious terms of economic benefit and prosperity for all, we end up with something like this:
It is the policy and objective of university administrators to exploit the Bayh-Dole Act to promote the growth of administrative bureaucracies dedicated to creating speculative betting pools for wealthy investors and to divert state economic development resources; to undermine a national infrastructure for the development of research assets and replace it with a provincial system that fragments rights into order to produce licensing gridlock; to turn collaborative relationships with industry into ones based on threat of litigation (such as, for infringement or for breach of license contract); to offer only positive information regarding university licensing programs, with the expectation that public technology transfer policy should be based on such spin and not on sound data; that federal agencies should give no thought beyond platitudes to the objectives of their research funding, leaving the strategies of patent management to university administrators, who as if guided by an invisible hand, in pursuing institutional profit from exploiting the patent system will necessarily produce the best possible economy; to replace the default of open publication and free access to research information with the burden of institutional claims of ownership and contracting with institutions for licenses, resulting in delays, onerous terms, an insistence on obligations and payment incommensurate with the purposes and risks of technology acquisition; and in short, to ensure that a bureaucrat’s thumb–but not any federal bureaucrat’s thumb is in every research innovation pie.
These are the effects of the Bayh-Dole Act. Given that Bayh-Dole has not been repealed or even seriously re-considered, to take these effects to be the objectives of Bayh-Dole. This is, as it plays out, federal research enterprise policy. If the firemen arrive at each fire and decide not to put it out, then whatever policy claim motivated the creation of a fire department and the acquisition of fire trucks, hats, hoses, and dalmatians–and whatever is put into formal regulations regarding fire departments–if the firefighters don’t actually put out fires, but only dress up in cool suits and drive around in red trucks to watch the fires burn, then that is the working, actual, in-fact purpose of the fire department. The fire department can report on how many fires were reported, how many the department sent its firefighters to, and the costs of doing so, but it does not have a fire-fighting purpose, despite its claims.
The same goes for Bayh-Dole. It may have had a decent purpose in using the patent system “to promote the utilization of inventions arising from federally supported research or development.” But for that purpose to be realized, someone has to show that those using the patent system have indeed promoted the use of inventions made with federal support. We do not see any such thing. In practice, the patent system has been used to grow a bureaucratic system that depends on the diversion of funds from research and instruction to patent speculation–institutional ownership, institutional licensing for profit, selective reporting to cover actual practice, and suppression of even the coarsest details that might allow public review of the law and the practices that the law has blessed.
Require public reporting in Bayh-Dole, if it is to continue
There are many things that could be done better than the Bayh-Dole Act does them. But if Bayh-Dole is to remain in place, at least it should be modified for nonprofits:
- to remove the exception to FOIA for reporting the status of subject inventions
- to require federal agencies to request an annual report on the status of each subject invention claimed by a nonprofit organization
- to require federal agencies to report to Congress the status of each subject invention claimed by a nonprofit contractor, giving the patent status, the status of development of the invention, the number of licensees for the invention, the date of first commercial sale or use, if any, and the income received for that invention, if any, separated into the category of earned royalties on sale or use and other payments.
- to require that any subject invention claimed by a nonprofit and not subject to development efforts under license within three years of the issuance of a US patent be returned at no charge and with no reservation or rights or other institutional requirements to the inventors for disposition under 35 USC 202(d)
- to require that any subject invention licensed exclusively by a nonprofit and not offered for commercial sale or use within eight years be made available for license on a non-exclusive, fair, reasonable, and non-discriminatory basis.
There is nothing in such information that would threaten patent rights or is so sensitive that it should form a trade secret of either licensees or the nonprofits–if a nonprofit is developing a subject invention, then it should be willing to report the fact; if an exclusive licensee is developing a subject invention, then that fact should be reported as well. Think about it. If a nonprofit licenses an invention with the public purpose that the invention will be developed to the point of practical application, then either the licensee is doing so or stands in breach of contract. If the license does not obligate the licensee to develop the invention, then the nonprofit has failed in its public purpose in owning the subject invention. If the exclusive licensee is not developing the invention, then it has no public reason to hold a monopoly on the invention. It is merely speculating, holding a patent right as an asset to prevent others from having the right use or develop the invention, or to disrupt the efforts of others to develop products that might compete with the licensee’s own products. Date of first commercial sale or use and the income received by a nonprofit licensor across all licenses granted for a given subject invention also should be a matter of public record. There are ways to structure royalty payments so total sales figures cannot be reconstructed. It’s not such a big deal as all that. Exclusive licensees, then, should recognize that accountability comes with monopoly.
Aggregate data fails here. We need a report for each subject invention. One cannot follow a report of 108 subject inventions claimed with 44 patent applications and 69 licenses–the 44 patent applications could be related to only 7 of the inventions (multiple filings, continuations, foreign applications and the like); there could be one patent (or patent family) licensed 69 times and the rest not at all (nice for that one patent family, perhaps, but a bummer for the rest). To formulate clear policy, we need information presented in formats that reveals rather than hides activity.
As for changes 4 and 5, they remedy Bayh-Dole’s march-in procedures that are so convoluted that they have never been productively used with even a single subject invention in 35 years. The de facto federal march-in policy is to prevent federal agencies from marching in at all–that is, it is federal policy for there to be no meaningful oversight of private exploitation of patent rights arising from federally supported inventions. The proposed changes make march-in automatic in specified situations. No need for anyone to mount a protest and be ground down by bureaucratic maneuvering.
Without basic status information, there is no way to know whether the primary stated purpose of Bayh-Dole–to promote the use of inventions made with federal support–has been achieved, and if so, through what means. My expectation is that actual data would show that most–90% or more–of subject inventions claimed by nonprofit contractors are not developed to practical application and that the primary overall effect of Bayh-Dole has been to fragment and delay the uptake of research assets developed with federal support while creating a huge non-federal professional class that lives on the diversion of money to maintain a complicated, unworkable but lucrative system of administrating patent rights. The University of California estimated in a recent report its commercialization rate was 0.5%–1/2 of one percent. 99.5% unsuccessful. 1 in 200 inventions. Does that match expectations for Bayh-Dole?
There is a legitimate place for university technology transfer
This expectation has absolutely nothing to do with the intentions, sincerity, diligence, and expertise of university licensing officers. Some of them are brilliant and insightful. Some are wags and bullshitters. I’ve seen a lot in my years. It makes sense for a university to offer resources to support the development of inventions, just as a university provides resources for other aspects of research enterprise–helping faculty apply for grants, providing research facilities, dealing with oversight for use of animals or humans in research, handling accounting, and subsidizing publication, and the like. There is surely a role for institutionally supported intellectual property smarts in all this, advisory to faculty investigators. But those smarts do not have to come with a compulsory demand for ownership, nor with an operating model defaulted to exclusive licensing, nor to an operating model that demands payment or refuses to give up ownership once an institution has it, nor to secrecy, nor to repeating claims about public benefit only the most remotely connected to actual intellectual property decisions.
There ought to be a public debate on the effect of Bayh-Dole. That debate should not be dominated by spin-appeals, such has been the behavior of AUTM and other groups that its members use as fronts, including COGR and AAU and APLU. The debate should be based in facts, in an articulation of what is possible, in multiple accounts of the history of particular efforts to develop new technology, and in experiments to identify alternatives. Even if Bayh-Dole were the massive success claimed for it, these things should happen. Times and situations change. What may have been perfect in 1981–funny to write that, given just how awful Bayh-Dole is as text–may be a huge problem in 2016, not because we have found out the defects but because the law hasn’t changed while the world does change. What’s patentable has changed. How patents are granted has changed. Government funding patterns have changed. Technologies have changed. Manufacturing has changed. Standards have changed. One would think those considering laws concerned with the federal role in directing innovation for public advantage would routinely look at their work and ask what they need to do with policy.
Universities could report voluntarily, but they don’t
One does not need to change Bayh-Dole, of course. Any nonprofit could develop programs that implemented changes–they could voluntarily report publicly on the status of all their claimed subject inventions; they could offer simple, direct, non-exclusive licenses for free or for a nominal amount; they could make institutional ownership voluntary–and doubly selective, first by the inventors offering to assign and second by the institution itself agreeing to accept assignment; they could consult with industry and the research community before choosing a patent and license strategy; they could release inventions that it comes about they are not good agents for; they could aim to do the right thing (which often turns out to be profitable) rather than the thing that sounds profitable (but frequently turns out not to be profitable and even a damaging liability).
Yet the few institutions that have intellectual property programs devoted to growth of research enterprise or socially responsible licensing come under attack for not “making money” or “dealing with wealthy power-brokers” or “making a show of success, like ___________.” Perhaps, then, we need federal and state recognition of programs based on their data and their deeds, not on their spin and faux sincerity. Plantation foremen could be kind or vile, but they still worked for a plantation. If university technology transfer is to have a renaissance, it will likely start with an emancipation proclamation–free the inventions–whether at the university level, by a courageous leader, or at the federal level, but an elected official fed up with the lack of productivity, and from there, those involved in supporting innovation from research enterprise will enjoy a new status, not as appointed plantation supervisors committed to the continued vitality of the plantation, but as honest contributors to the national well-being by promoting the use of research-made inventions.